State Senate President Cool on Privatizing Pinnacol Assurance

Colorado Senate President Brandon Shaffer (D-Longmont) has expressed skepticism of the proposed privatization of the Colorado workers’ compensation insurer of last resort.

We reported last month that Governor Ritter was considering the move to close the state’s nearly $2 billion shortfall for the upcoming fiscal year.

“I think it’s a bad deal on a variety of different levels, and I’m not willing to go forward with it,” says Shaffer, who offered little to his reasoning.

Any agreement to give the Pinnacol fund full autonomy would have to be approved by the legislature. But at this point, no bills to do so have been filed so in order to pursue this option this year, Shaffer or House Speaker Terrance Carroll (D-Denver) will have to allow a legislator file a late-status bill. Shaffer has said he will not allow such a move in the Senate for this purpose.

But Speaker Carroll has a differing view, stating “I think it’s premature to say that anything is off the table, considering the economic environment we find ourselves in.” He noted that Morgan Stanley, who is representing the state in any potential transaction, is still conducting its assessment of Pinnacol. The financial firm is expected to advise the state on a fair price for Pinnacol soon.

Earlier this month, Pinnacol offered the state $200 million to cut almost all of its ties with the state. In addition to the $200 million, Pinnacol is also offering an additional $75 million this year and next and $50 million per year for the next 30 years. Their proposal also calls for the company to remain the workers’ compensation insurer of last resort and pay state taxes on all of its policies except the mandated, residual market ones.

Pinnacol would also retain its federal tax-free status by maintaining the requirement that a majority of its board members be appointed by the governor.

One of the insurer’s conditions is that a number of bills in the legislature aimed at further regulating the insurer are dropped. Some lawmakers in the legislature are skeptical, saying that this condition would amount to a bribe and perhaps violate the law. They also think Pinnacol’s offer is way too low considering they have over $2 billion in reserves.

The governor’s office has been working closely with Pinnacol on the deal. Spokesman Evan Dreyer says the idea is still being considered by the governor and says “There are many stakeholders – including the House and the Senate – still working to determine if this is a viable concept or not.”